Archive for January, 2012

This chart is of a stock that is traded on the New York Stock Exchange (NYSE). Each bar represents a 30 minute time period and it shows approximately one month’s worth of data. The scale on the bottom of the chart shows the date and the scale on the right the price.

For the last few weeks this blog was mainly following patterns that the Euro currency was plotting in relationships to symmetry and respecting previous support and resistance levels etc.

As you can see the same general principles can be applied to all markets and in all time frames.

You should remember that resistance, often called overhead resistance, is where sellers are and can be related to the ceiling in your house. The support levels are where buyers come in and keep the price from going lower which you can think of the support area as the floor.

I often talk about support areas becoming new resistance levels when the price breaks the support line. An easy way to remember that is to think of a two story house with the floor of the upper level being the support but when price breaks through or goes lower than the floor that area becomes a potential new resistance level where sellers may be.

This material should be considered as 100 % educational and NOT investment advice. Your focus should be on identifying patterns and practice drawing the lines on your own charts.

50 / 50 system
Here is s sample of a larger study I’m doing that simulates a random 50/50 system. The results of similar samples show the same clustering of R’s and U’s (win loss or visa versa). I know from experience that after several losses in a row I think about sitting out or changing the way I think about my trades but in actuallity I should expect several in a row both wins and losses.

When a runner wants to improve a marathon time they either have to increase stride rate or stride length. I think of that as working on risk reward .

Can you imagine a pro athlete that didn’t practice his or her game? I don’t think so! The video is a market replay of Jan. 6th non-farm payroll report. By understanding the market during these times can help you make the decision to be or not to be trading. Please pay attention to the actions and reaction.

I’ve attached a comparison chart of the 1929 Dow Jones Index along with a current chart of gold. We are now in the age of high frequency computer generated trading and some might think the markets are completely different now. These charts show bubbles then and bubbles now with visible similarities of patterns. Even though the intraday trading volume is way different the plotting of human emotions on the daily scale remain the same.
This type of action can be spotted in all time frames being plotted on graphs so if you are an investor in a stock and it look like it’s going to the moon and then sells off you can know it just didn’t happen to you. There isn’t any predictive value on the charts posted just a lesson in market history.
If you are new to investing/trading this lesson’s focus was meant to be on the fact that markets go UP,DOWN,and sometimes SIDEWAYS so plan accordingly